Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Grow Your Own COLA

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

SmartMoney recently reported that the government is considering a change in the way Social Security cost of living adjustments, or COLAs, are calculated. The article cites figures from the Senior Citizens League, which estimates that under the new measurements, the average retiree would see benefits drop by a total of $18,000 over a 25-year period.

I can't control how the government decides to calculate Social Security benefits in the future, but I do know of at least one approach that cranks out annual cost of living increases no matter how inflation is calculated: dividend growth stocks.

Standard & Poor's maintains an S&P 500 Dividend Aristocrats index, which is a great place to start a search for dividend growth stocks. These are S&P 500 companies that have raised dividends every year for at least 25 years. Currently, only 42 companies have what it takes to join the club.

Some further digging boiled the list down to my six picks for investors seeking a combination of decent current yield, generous dividend increases over the past several years, a reasonable payout ratio, and good future growth prospects. Those last two characteristics are important indicators of a company's ability to keep its Aristocrat status. Paying out too much of the earnings and/or experiencing very low earnings growth crimps the ability to keep cranking out a nice raise for shareholders every year.


Dividend Yield

5-Year Average Annual Dividend Growth Rate

Payout Ratio

5-Year Estimated EPS Growth Rate






Abbott Laboratories (NYSE: ABT  )





Air Products & Chemicals (NYSE: APD  )





Lowe's (NYSE: LOW  )





McDonald's (NYSE: MCD  )





Procter & Gamble (NYSE: PG  )





Sources: Standard & Poor's, Yahoo! Finance, and author's calculation.

Even though this list looks like a nice dividend portfolio, the results should be considered ideas for further research, not outright buy recommendations. Just because a stock is a Dividend Aristocrat, that doesn't mean it'll keep that title. The list had several casualties in the world of finance over the past several years.

These six stocks cover a diverse group of businesses, ranging from an insurance company represented by a duck to an industrial gas giant serving several well-known household names. What they all have in common is a long track record of treating shareholders to more cash year after year.

Investors who prefer exchange-traded funds can hold dividend growth stocks with the Vanguard Dividend Appreciation ETF (NYSE: VIG  ) . It contains even more strong dividend payers. And if you like, you can follow any of the stocks mentioned here using our free watchlist service, My Watchlist.

Fool contributor Russ Krull owns shares of McDonald's, but has no position in any other stocks mentioned. The Motley Fool owns shares of AFLAC and Abbott Labs. Motley Fool newsletter services have recommended buying shares of AFLAC, Procter & Gamble, Lowe's, McDonald's, and Abbott Labs, as well as writing covered calls on Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 19, 2011, at 5:49 PM, xetn wrote:

    It is really handy to be a government dictator, because you can make the rules that everyone else is force to comply with, but you get to opt-out in favor of a better system.

    This is why none of the government leeches are in Social Security, Medicare or ObamaCare. It seems to me they should be "eating their own dog food".

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1520805, ~/Articles/ArticleHandler.aspx, 10/24/2016 6:09:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
ABT $40.41 Down -0.09 -0.22%
Abbott Laboratorie… CAPS Rating: *****
AFL $70.02 Up +0.64 +0.92%
Aflac CAPS Rating: *****
APD $134.81 Up +0.37 +0.28%
Air Products and C… CAPS Rating: ***
LOW $70.98 Up +0.33 +0.47%
Lowe's CAPS Rating: ****
MCD $113.57 Down -0.36 -0.32%
McDonald's CAPS Rating: ***
PG $84.10 Down -0.23 -0.27%
Procter and Gamble CAPS Rating: ****
VIG $82.73 Up +0.43 +0.52%
Vanguard Dividend… CAPS Rating: ****